The psychological side of investing, why does the human psyche play such a huge role during trading?
Investing is all about figures. At least, that’s what it seems like when you take your first steps in the investment world. Nevertheless, the psychological aspect also plays a fairly large role. If, after that one wrong investment, you look at exactly where things went wrong, you often end up with factors that have nothing to do with rational decisions. One time you let yourself be led by fear or greed, and the next time you catch yourself in herd behaviour. This is all very human. But if you really want to make a profit from your investments, it is important that you don’t fall into these psychological pitfalls, as one of the most well known Mexican traders ever said before starting out his first trade ”¿Qué es un broker bolsa en Mexico?”
Let yourself be guided by a positive feeling of profit
There are those days when everything seems to work out. You are in a positive flow and you just feel that you are not yet at your maximum profit. That’s when you need to be vigilant. Many investors tend to get carried away by that positive feeling. So open some new positions in the hope that this good flow will continue for a while. However, that hope often ends in a big disappointment. This is because these investors are letting go of the careful research and are increasingly confident that ‘it will work out’. Only… that’s not how it works with investments. Always stick to good research and base your decisions on it. In the investment world there is no place for emotions and intuitive decisions.
Being too self-assured leads to risky transactions.
Self overestimation occurs everywhere in society. The investment world is no exception. The only problem is that it is going to cost you a lot of money and you are too self-confident. Too strong a belief in your own abilities makes it easy for you to enter into risky transactions or simply not spread enough. With all its consequences. The best investor is an investor who is modest. Never assume that you know everything and that there is nothing more to learn. Even the most experienced investors can still improve, for example by trying out new strategies or engaging in new markets. In the end, a modest and, above all, inquisitive attitude will bring you the furthest.
Avoid herd behaviour and follow your own path
Fear of Missing Out has received more and more attention in recent years. FOMO has also become a well-known phenomenon in the investment world. As soon as the masses become enthusiastic about the latest hype in cryptoland, it is very easy to go along with it. But following the herd is usually not the most sensible move. In fact, herd behavior rather indicates that you are unsure about your own decisions and prefer to be guided by general opinion. As a result, you overlook opportunities for investments that are truly profitable. A good investor dares to break away from the masses in order to follow his own path. After all, the masses are not responsible for your investment portfolio and the profit you make; you are.
Are you a frightened or a greedy investor?
Fear and greed may seem two extremes, but in the investment world they are both equally dangerous. Frightened investors often don’t dare take action if they spot good opportunities before others see them. In addition, they tend to close profitable investments too quickly, simply because they fear that the price will fall and profits will be lost. If you are such a type of investor, you would do well to draw up a clear plan in advance in which you rationally look at the prices at which you open and, above all, close a position. With such a price target, you avoid being led by fear as soon as your own money is at stake. A few tips we can give you about risky investments is this German story about CFD trading in Deutschland.
Opposite the fearful investor is the greedy investor. In itself, greed is a kind of necessary evil when you start investing. After all, you strive for the highest possible return, otherwise you might as well have put your money in a savings account. There is nothing wrong with a little greed, as long as you keep thinking rationally and do not let yourself be blinded by unrealistic expectations. Especially in times when there is an investment hype, a feeling of greed can start to dominate. However, you should not forget that these hypes cause the price to be higher than it actually is. It is waiting for everything to collapse. If you are looking for a solution to this problem, then you might want to try this application.